JAMES CONEY: Why are nest eggs fair game when it comes to getting the economy back of track?

Successful small business owners, workers with generous final salary schemes and the very wealthiest will be hit by the raid on pensions.

They will either be caught out by a lower cap on how much tax relief they can get on their pension contributions, or by a limit on the amount they can save up in a retirement fund.

Yesterday, George Osborne announced the annual tax allowance for pension contributions will be cut from £50,000 to £40,000 from 2014. The lifetime limit will be lowered from £1.5million to £1.25million. For the vast majority, paying these sorts of sums into a pension pot is unimaginable.

Legacy: Around 330,000 of those currently working could be affected by these pension changes in the future.

A 30-year-old, getting healthy annual pay rises and benefiting from a good return on his or her investment, would have to pay in 40p of every £1 earned every year for 35 years to get close to the £1.25million limit, according to insurers Standard Life.

Even someone in a very generous final salary scheme, with 40 years’ continuous service, who retired on £97,500 a year, would only just bust the cap.

The Government estimates that just 30,000 people would have more than £1.25million in their pension pots in 2014.

But around 330,000 of current working age could be affected in the future. These are all likely to be senior staff in companies or the public sector, with good final salary schemes to which they have contributed for years.

It is the annual allowance which will catch out more workers. Typically, small business owners don’t pay into a pension during their working years, instead preferring to make a large lump sum when they sell their company.

Head teachers, police chiefs, senior nurses, middle-ranking civil servants and private sector managers on around £50,000, who are in final salary schemes and get a 10 per cent pay rise could also bust the cap and face a tax charge on the excess.

The raid on pensions may be morally acceptable but the Chancellor must, once and for all, make up his mind how he wants to treat tax relief on pensions so workers know what to expect in retirement.

The message that this Government keeps reinforcing is that savers’ nest eggs are fair game when it comes to getting the economy back on track.